captions paifor by nbc-universal television this sunday. >> i will not b a candida for relection this november. >> i want to do other things in life. >> no longer a candite for re-eleion in 20. >> 1 monsfterresident obama swtemocrao vicry in congss, cld ts string of key retirements turn the te for the party in 2010? a liveebate thi morng betweethe two ses on the midter electns and t oma agenda. demoatic nationalommittee chairmanoverr tim knef viinia, vsu republican

tional cmitt chairn michael eele. then, he is governo of the ate withhe wor'sighth largest econy andassive $20 billion budgdefit. as arnd scarzegger eer his final year as the governor of california what can he do to tu h state ound? how es theutur of lifoiampact t rest of the unitestes? rxcluve interviith californovernor arnold schwarnegger us, obama's porities for the upcoming year. how will the shiftg ndsce affect healtcare and the econom afteth attemed chrisas day airline bombi expes crks in the nation's sury systemthe preside promis toeep the cntry safe. >> i am less intestedn passg out blamehan i am in learng from and correcting these miakeso make u safer. for timately, the bk sto with me. insight and alysisro anea mchellnd nbc ns

politica decto and chi white use correspondent chuc todd. >> first,ood mornin li from l angeles, we have come here t put a spotlit o a sta thats on the leadi edge of this country'scomic downrn. we'l speith govnor arnol schwarneer in aewminute amid a ofhe polital nsion tre isew developin thiseekend back in washingt. that the presint relead a statement yestday staing behindhe senate majority leaderarryeid aerome raally inssitive rarks redeuring the2008rima campaign about theandate obama wereeported in a jt published book. here with us live to talk politics the chairman of both potical paies, goverr tim kaine and rnc cha mhael steele. od morni to bot of you. >>ood morning. let metart with tse remarks by har rd as reported in thisookbout t

2008 race. setore was wowed by obama's gifts and belved that the untry was ready to erace a black psintia candide, espeallyne such as ama, a que lighskind rican-americ quote wit no gr dialect unls he waed to he one as he said privately. rooetd was convinc that ama'raceou hp himore an hurt him for the democrac nominaon senator reed quickly apologized he spoke to predentbamaho saissued a statemt sayi e case isclos. he accepts the apoly. governor kne, shldhe be a consequence f these remarks? i thi the cases csed because president obama h spoken dectly with the lde and accepd his apology. the comments were unfortunate and thewere insentive. they were in t ctext o aisinghe senat and acknowledgin that the senator could be areatresintut they werstil insensitive. i thinsenareedtepped up,

acowledged ty we wrong. we'r ming . >> michaelsteele, back in 22 trent lo was oted for insensitiv remarks he said th strothurmo, had he bn ected president wld have ha some ofhe problems over allf those years, tn state senator oba said a that point that lott ought to be ousted as marity ader. u see a differenc between thenndnow? oh, yh, there is aig ubletandard re. the thingbout it thas interesting is tt whe democratgetaught sayin rasthings you ow,n apogy is enough. ifhat h been mitch mcconnell saying tha aboutn afcan-ameran candite f president of the united states, trust me, this chairma andhe dncoulde screang for h head ver muc ashey wereith ent tt. and t reality of i i rasm, andacist cversions heo place day in amera. is rm,hisou know,ik

he'soi topass,orample, for itemerica becau he's you kn, gothis gro d ikt, that's languehat harken bk tohe 1950s and s and confirmso me a mi-set o of step withhere amica . but i can assure you if i had a tional chama said tha we, it's all bind usnd 's apolozed let's move on, no one wou be accepting th. therhas to be aonquence here i t standd is the o at was s in 02 with tre lo. is theonsequence that nator reid shod step down? >> i believe iis. ether he steps down today or i retire him i nembe either way he wl t be the lear i 2011. governokaine. >>well first, t senatoraid i me,hairnteel sai eaier that the repubcans wereot gng to win it back so ader reids going t behe lead. anody lkit trent lott's statemts praising somebody who

had bn a pro sregation candidatfor esident wlee that there inoomriso betwn os comments and tho of sat reed's. th senatorid mak comnts that were wrongnde ologiz but made them i the context of promoting the candidy of senator obam >> y d'think he shld resign. >> aolutely no >>et me moveno the litics otheountry a the mood of the couny. chairman stealeow is theooñr ou t cotry. >> the mooof the cntry is so. peop are angry, frtrat, ared. i thk youee a havseen certnly009 electio and will s this ye the pli stanng up sayg ty had engh. they are sayg n t me taxes, noo me government. as we are about toelebte th one-ye anniverry of t adssion,e have health care, weavno jo, we have no meynd w he13 trillion of debt. th inot lost o the american peop now so ty e goingo e pos,oing t tn hall to the strts ohe count and saying enough

and theyreuttinghe leershipn noce. pay aenti tous, listen to us. we're telling you whate wa and what we donñi nt. an yet tsdminisatn and is democratic partyas a ti ear to theact peopl are huing, we hav't creat jobs yenowe're going to hav other conversaonbout jobs. thathould hav again the conversation o the fst day, not e tngs that t admission psued >>haman cane it's a fficult ar t be a cumbent party as e democrats are. >> vid, it's a cllenging one. as y know t history is this, that midrm ectio for president sie 19, the president uld norllyose about 2ouse ses, four seteseats,os govnor ras. t th good thi about present ama's teamhey aren used to an upllclimb. wee goingo do bette for thre asons. firs this presentoesave a record of ccess. fromayne fused onconomic recove in ways that hav c job losses fro800,0on in theast mth to 8000 a nth. we're not where we wt to be

yet but tnk gdness we have reed the fe fa of the econy an we seeositiv signs througho t naon. we're not wre want e yet. cond, t other se h more retiremes thane have. i know we' pbably talk about that. buonhese retirements thi week, 1house republicans he announced retement, t demoats. x republica senators, t democrs. four replican governors announcedretiments, two democrats. that'soing to help us. filly,he republins he demotrated ty aren't rea le. from saying no everything t hang an iernal btlemong e ptyhasi arlen speer out,he rublican nominee in the ngssnal race in upate new yo. just thiweek kickingut t orid p par chair andany mastream replicans facg primy btles or censors like senatograham. the on theepublican de at's gng tenab uso do tterhan manyolks ink.

>> chaman steelearli y said that you didt thi tha the republicanarty cld reta the morit in congrs in20. if y thi presidentbama i doing so prlhy d you say th? >>,he rest of that was if we'rnot prepad to dot if we d't have princle candates ohere running as neeto and we have those candidates, weave the indiduals who a alrdy mang ma. look, i'mxced authe fact 'reoingo eagen a vy aly battlend campaign ok at what we din 2009. weon new jersey governorship, weon the goverrship ofour state. u kn, the reality ise hav candidat with ideas tha peop want to pa aentiono anfoll. rit now in maschuset scott brown is doing alealia forty listeni tohe ople of massausettsnd lking to the about common nse agendas tha empower the omhe btomup, not government down th realityemains this thisdministrioput me things onhe table thaturne america f.

th questn isn't whether or nothe replins takehe houseack. 's whether onot the demoats n keep it. d right now ty cat. >>et me jus be clear here. hold on. chrman, do you think republans will rein conol of coress? >> abluly. soluly. the te we're goingnow, t groundame we're pting in place we absutely c takehe congre back thiyear the ll not b a60eat majority forheemocrats ce january xtyear there' parod that's gngo be cated and theepublicans are going treate that >> david, let me goaco what chrman stle said. he sai t replins we not in to te coness d h said why. it's bause they ar not rdy to lead. we s that o and overagain, a plosophthat says n to evything. th stas by and watches an ecomy fe fall. >>old on i want tontje specific issues and hav morearged respons. you'll hr om governor arnold scarzeggern aew minus, vernoraine. he was an early support of the noti ofealth care form,

thwhite use s relying on him. ss tha the bdenhat healthare reform that's comg wn the pike wl te the burden it plas states is onous, that it'ski to beatg up on a state like california which has a $20 billion shortfall because of the mandate to expand the medicaid rolls including some other demands on the states. you're a governor. do you understand what he's saying? >> david, i do. but i looked at this carefully in connection with the virginia budget, and i think what is often missed is that there's going to be some cost to expand medicaid but that will take huge financial burdens out of state budgets that we're incurring now to take care of those who are uninsured. virginia as an example. we have over 1.2 million that are uninsured. and we spend hundreds of millions every year to take care of them in the emergency rooms for serious emergency treatment that could have been prevented under this health reform bill, for example, preventive care is

no co-pay so we're going to move toward prevention, state budgets are going to save dollars that we're spending now to try to pull people back from the brink of sickness that they need not be suffering under with a better health care system. i think virginia stands to benefit much as do other american states from finally passing meaningful health care reform. >> chairman steele, do you think it will help republicans in the fall to campaign against obama's health care reform? >> absolutely. it's a boondoggle. it's loaded with taxes, with government intrusion and regulation, it's loaded with you know, debt that is going to be passed on to future generations. like governor schwarzenegger governor kaine is passing on a $4 billion deficit to his successor. where do you think that deficit comes from, it comes from the weight put on states by unfunded mandates. if you bought into this health care plan in the first place where you signed on and took some of the early money there

were strings attached. you have states that are now going to be burdened in the future to fund programs that the federal government said we'll do today but you carry the weight tomorrow. this is the reality that a lot of governors around the country are facing and you're going to layer on top of that a health care boondoggle and experiment that no one can tell you what it's actually going to cost. we're now hearing it's going to be a little more than we thought. people realize what's going on. >> i think you asked an excellent question. will the campaigns of 2010 be heavily focused on health care. you'll have the republican party campaigning to repeal this historic health bill that will pass. you'll have me and my team out promoting it. i want to have that campaign, i want to face a republican party chair and leadership that says no, we need to go back and let insurance companies kick people off who are sick. i want them to explain why 47 million americans are uninsured and why the costs will continue to escalate to break the bank of middle income families and

businesses. let them defend that status quo. >> we'll defend -- >> gentlemen, let me leave health care. i have a couple of issues i want to address. chairman steele you have a new book out, the 12 steps to take on the obama agenda and you talked about making it very clear that there will be penalties for certain conservatives who don't espouse conservative values. your leadership has come under some question, whether it's statements you made like earlier in the week saying you wouldn't take back control of congress, you picked a fight with rush limbaugh, people have questioned you for taking money and you said if you don't want me in the job fire me. until then shut up to your republican critics. are you an effective leader of the republican party? >> i think i am a passionate leader of this party, i'm a grass roots guy. i grew up in the streets of d.c. at 17, decided to become a republican. i've been fighting that fight ever since. i believe passionately in the principles that drew me to the

party. i get angry when we walk away from those. i get frustrated when i see those principles not regarded because they have been the foundation for generations. as chairman i raised $80 million this year, i won two gubernatorial races no one thought. one in his back yard. i've got 370,000 new donors to the party, $8 million cash on hand when the budget i inherited said i would have zero, i would have debt. i have no debt. they have debt. i have the same amount of money cash on hand as my partner here who had the white house, both houses of congress. $8 million going into this year. so i think overall, i'm doing okay. >> final question, chairman steele, is the republican party guilty of politicizing terrorism right now? >> absolutely not. my goodness, no. >> they are. >> absolutely not. >> that's all they are doing on these is trying to politicize them. >> let -- hold on, governor. >> dick cheney has it dead

right. this administration has not put out a clear vision of how they are going to handle national security. and what we're going to stop close guantanamo, not done. we're surprised and amazed that the dots weren't connected on what happened on december 25th. the american people don't trust the direction this is going. if you can't call a thing what it is and that is terrorism people wonder if you know what to do with it. that's where we are right now. >> governor kaine. >> the president's approach to terrorism has been praised by many of the bush administration leaders across the board from the day he's come into office. when the incident happened on the air flight into detroit it was a matter of days before republican leaders were trying to use it in fundraising letters making all kinds of outrageous claims such as the president never uses the word terror. as you know that's ridiculous. he uses it all the time in speeches. they have been claiming that the way that this recent suspect is being treated is contrary to what should happen for national security. the case is being relate toed exactly the same way the bush

administration treated the richard reed case so. this is an instance where the president is doing the right thing, the republicans are just looking for an excuse to raise money and politicize it. this spt going to unify americans and keep us safe than play political games. >> we'll leave it there. the debate will continue in this hot political year. both of you, thank you very much. we'll come back after this and have more with chairman steele i should point out it's up this afternoon, you can read excerpts right now. and updates from me throughout the week. up next, yesterday i sat down here in california for an exclusive interview with governor arnold schwarzenegger, we'll talk about how he plans to tackle california's massive budget deficit. plus our political roundtable, with andrea mitchell and chuck todd. only here on "meet the press."

we're back. with our special broadcast from california, governor schwarzenegger, good morning. nice to come home to california. thank you for having us. >> absolutely. >> this has been a big week for you with your state of the state message and budget. 2010 begins a challenging place for a lot of states including california in this economy. do you feel like the worst is over? >> i think economically the worst is over. i see a comeback when it comes to job creation. we see also that homes are being sold again and that home sales are up. and i think that very soon we'll see construction again and new homes and so on. but when it comes to the

financial crisis that california is in, i think we are not out of the woods yet. as i said in my state of the state and in my budget speech, we still have a tough road ahead of us. and this year is one of those tough years. >> for the country as well, when you think not just about california but the country, and economic recovery, what do you think is the biggest threat to that recovery? is it unemployment? >> i think that we have to get the economy back. i think that we have to have money available, loans available so businesses can expand again. and people can buy homes. i think that we just have to get jobs back as quickly as possible. that's why we have tax incentives for people that want to buy new or used homes. and we just want the do everything that we can as a state and as a country to stimulate the economy. that's the key thing because i think that the worst is when people lose their jobs and they have to go home to their family and say you know, i have no more money. we cannot provide for the

family. or when both of the parents lose their jobs it gets tougher. that's the case in a lot of the families, so we have to do everything that we can. it's government's responsibility to stimulate the economy and to help. >> the federal government is spending a lot of money in stimulus, preparing to do so on health care reform if that gets passed. and there's a lot of talk about taxes, whether taxes will be necessary on the national level or even when you're facing a $20 billion shortfall. david ignatius wrote for "the washington post" that caught my attention. what worries me looking ahead, thinking about the country is what might be called the californiaization of america. the growing tendency of our political system to make promises in social spending programs that it isn't prepared to pay for with tax increases. think about california. how can you stick to a position, as you do, that tax increases are not the way to go? >> well, first of all we have no option because if you do the tax increases, you immediately kind of stifle the economy.

so right now where we try to get -- where we see that the economy is bottomed out and there is a chance now to come back, to go in now to hit the state with more taxes will be the wrong thing to do. so what you want to do is you want to do the opposite, you want to go and put money into the economy and you want to give tax incentives for businesses, for new hires as we did, or retraining people or for home buyers tax credits and so on. i think that it will be a big mistake. i think the thing that politicians should not do is promise things they can't keep and that they have no funding mechanism to go and follow through with. in california with the pensions, the public employees pension, i mean it's a disaster because in the late '90s they were prmsed things that there is no way the state can keep those promises. that's why i said that we have got to get democrats and republicans together and fix this problem because right now we are paying more than $3 billion to the pensions.

and eventually that amount is going to go up to $10 billion. that's money that's taken away from very important programs, universities, schools, health care, and all of those kind of other things. >> you think about the federal government's budget which doesn't have to be brought to alignment the way a state like california do you think taxes have to go up to pay for stimulus, for health care? >> i think that the government has to live within its means and of course the big advantage to the federal government has is they can run up those deficits and they can print more money. where the state can't. i tried to tell the people in california, when you have $85 billion in revenues available that's all you can spend. that's end. even though they want to spend 104 or $105 billion. so you have to make the cuts because we have to live within our means. we cannot print more money, we cannot run up the deficits as the federal government does. >> you called some of the cuts you put forward in your budget

draconian. one of the things you said the federal government has got too come to california's aid. what do you need? >> well, it's not so much coming to our aid, the federal government owes us billions of dollars. you see, there is a difference, in california one's got 94 cents to the dollar that we're putting in on federal taxes. now we only get 78 cents. but you have places like, for instance, alaska gets 1.86. you have new mexicoçó gets 2.03. so we are subsidizing those states. and that is the thing that is unfair so. what we're saying to the federal government, look, you're responsible for border security, for immigration and for all of those things that you know, if you fix those problems, if you help us you know, with the incarceration of undocumented immigrants which cost almost $1 billion. right now you're not paying any of those so it's unfair that we are paying in $1 and getting back 78 cents on the dollar.

and so we try to fix that and it's not a bailout. it's just being fair. it's federal fairness, not federal bailout. >> what about the stimulus. has it helped? >> i think it was helpful to california. i think that that was a big supporter of the stimulus package, i think they have given us money, with transportation or high technology, with all kinds of different things with our universities and so on, so we were very appreciative but it's one-time money. one should always know the difference between one-time money and ongoing money. one-time money, that's here today, gone tomorrow. ongoing money, when i talk about you know, increasing the level from 78 cents to 90 cents, that's ongoing thing. or when we talk about health care, that you have health care where we are owed billions of dollars in health care. that's ongoing so we want to make those adjustments with the federal government and work with them so that it's more fair. >> what happens if california doesn't get the money that you feel it deserves from the

federal government? what then? >> well, first of all, i never really think so much about option b because it's a loser's attitude. i think you always have to think about -- even though it has been difficult up until now to get that money, we've been fighting for it for six years but we never give up. it is just like with the redistricting reform. journalists ask wait, it has lost five times, why do you back the sixth time. don't you get it. the people vote no. and i said no, i never give up. i come from the sports background. just because you didn't lift the weight one time did you give up, never try again, no. there is no such thing. we're going to be back. redistricting reform the sixth time we won. the same is with this. we will never give up. we continue. this time we're going back with the four legislative leaders of california, democrats and republicans alike, and keep pushing and talking to the federal government, letting them know that it is unfair the way the money's being distributed right now. and so we also were inspired and

push extra hard, the california bipartisan delegation. they are not being representing us really well in this case. i mean, you know, if p you think about the percentage that voted for health care bill that is saying basically that california should pay for nebraska, so that nebraska never has to pay any extra money and we -- >> to expand the medicare. >> and then we have to pay 3, 4 billion extra. >> you said the president should rethink health care reform. >> absolutely. that's not health care reform. to go and to put that extra burden, billions of dollars on other states, especially on california. just because we're the best state in the world, the most diverse economy. and everyone wants to come to california is no reason to beat up on california. and to always ask for more money from california. i think it's time for the federal government to go and take care of us. >> is that how you think about health care reform, something that ultimately would beat up on california? >> yes, it is. right now, i cannot imagine why

we would have like i said, for instance, our senators and congressional people how they would vote for something like that where they are representing nebraska and not us. and by the way, as i said in my state of the state, that's the biggest rip-off, i mean, that is against the law to buy a vote. >> talking about senator nelson. >> that's like buying a vote to say -- >> the government will pay. >> i'm voting out my vote unless i get some extra benefits here. i mean if you do that in sacramento, you know, you'll be sued. it is illegal to do that, to buy votes. >> can i ask you a couple of more california issues. one of the things that got attention is your pledge to move money out of the state budget from prisons into higher education. i don't have to tell you that the university of california system has raised fees for students. what is the future of education in california? >> i think the future of education in california is great, i think we still have the best university system in the world. the key thing is that we reform

education from kindergarten through 14, especially kinderen through 12. we were fighting to change that for years now and finally we were able to change it. just the other day a signed legislation to reform education, it's inexcusable that children get stuck in low performing schools and you cannot get them out. without the school principal's permission. of course the principal will never give you the permission because it will be -- he will be losing money if he let as kid go out. they are strapped. it was like a chain on the exit doors. and now we finally changed that. or for instance, that parents cannot be involved in the schools. cannot be involved in which direction the school or education should go. now they have that reform, a chance to turn low performing schools, failing schools into charter schools or close the school or move the kids out of the school or fire the school principal or teachers and so on. so those are the kind of things,

the kind of reforms we need to do and i'm get finally both parties got together and created those reforms that they have been fighting for for years. here is a good example of a good relationship with the federal government because the obama administration was very instrumental, arne duncan, the education secretary, to push the states to say here is $4.3 billion, you can compete for this money. and we can get $700 million so that kind of put it over the top so there was the federal government very helpful in this. >> let me ask you about president obama. do you think he's doing a good enough job keeping america safe? >> i think that he's doing everything that he can. i think that, you know, democrats, a lot of times get the rap. they are not strong on security and those things. i think he has talked about the issues. i think he has been fighting for the issues. this was an unfortunate situation of what happened over christmas and i think it's a

total failure in the communication within the departments, that when you look back all of the instances that are happening it's always to say well, we had everything in place but we didn't pass on the dots weren't connected or something. it's not like the president has done something wrong because he was in hawaii or anything. it's nothing to do with that at all. what it has to do with is simply they didn't connect the dots and within the agencies, within the airport authorities and homeland security and the cia and everyone, they don't connect the dots. we have this problem before we started creating homeland security also here in california where in california, the law enforcement did not really communicate well with the fbi, didn't want to give certain information. the fbi didn't want to give information to law enforcement. all of this territorial fighting going on. and i think that that has to -- we have to get rid of that problem and connect the dots. other than that i will say we have very smart people in the

leadership. it's working together is the hardest thing to do. >> working together as you come to the last year of your tenure as governor. where do you fit in the republican party of today? >> i'm a reformer. i'm an independent reformer. i came into this job here saying that i want to be the people's governor, not the republican party's governor but the people's governor. i wanted to represent democrats and republicans, i wanted to do everything i can to bring democrats and republicans together. that's why i'm talking so much. i think it's extremely important the action is to bring both of the parties together and look at what they can do together rather than to just talk about what they want to fight over. let's do it together. let's go in the beginning of the year and say here are the things that need to be done and then get them to work together on those. we in california even though california is known as a state that is not governable, it is very hard to govern california.

probably the toughest state to govern but we got a lot of things done. i'm very proud when you look, i always run around with this list, david. and i put this down. workers compensation reform, done. budget reform, not done. we still have to fight for that. rebuilding our levee, rebuilding our roads, rebuilding our schools, more affordable housing, rebuilding prisons, those things were done. but then tax reform, was not done. campaign finance reform was not done. opry marys was not done. i think we have a lot of things we could have done even though democrats and republicans fight. but i think it is much easier when people take party out of the way. i know it's hard to do but you got to be a servant to the people, not to your party. >> you think the republican party is doing that of today nationally? >> i think both of the parties are not doing that because it is so political, it's more thinking

more about the party than about the people and i think that as soon as both parties come together and have regular meetings and say what can we accomplish together than worrying about how do we get elected and how do we get more people elected for the republican party and how to get more elected for the democratic party, all this, i know it's part of politics, to do that. but i think that we should tone that down and lift up of what is important really for the people. look, this country need to rebuild itself. we are still living off of the eisenhower era and off the roosevelt era when they built the thousands of bridges and government buildings and the roads, the highway system and all of those things. what's the new thing we are building. we haven't built anything in decades. we need high speed rail, new infrastructure. we have countries like china and europe that are very fast gaining on us and surpassing us so we got to get our act together and really make this country kind of live in the 21st

century, not be with the infrastructure in the 20th century >> you think the republican party is poised for big gains in this election year in. >> without any doubt but not because some miracle is happening that they did. or that the democrats didn't do. by nature you always see that. that you know, there is a huge momentum two years ago, a huge momentum for the democratic party because the republicans were in charge for so many years, they have done a good job, the republicans but the momentum was swinging the other way so the democrats got all of the votes. now i think the pendulum is going the other way and i think that the republicans are really going to benefit this year from that. and you know, they will have a chance to come up with good ideas and how to go in the right direction for the country. >> final question. what's ahead for arnold schwarzenegger? is it politics or hollywood? >> i don't even think about my next move at all. i'm thinking about this year, because there's so much -- so

much opportunity this year in tax reform, in budget reform, to really move the state forward in the various different areas that we need to move the state forward and bring in both of the parties together and to get our infrastructure, the water infrastructure passed -- pay no attention. just a little earthquake. >> when you speak things happen. >> in california when there is a noise, governor never shakes, worries because earthquakes happen all the time. >> i'm an l.a. guy. >> exactly. so that's the bottom line. i'm not thinking about myself, i'm thinking about the state. that's the key thing. and then when i'm finished and i can always think about myself. >> all right. will you run for political office again? >> well, you never say never but i mean, you know, right now i have no plans, period. >> governor schwarzenegger, thank you. >> thank you. >> and coming next, a look at the 2010 political landscape plus the president's priorities for the coming year, his plans to keep the nation safe after the attempted christmas day terror plot.

insights from our roundtable, andrea mitchell and chuck todd join us here in los angeles. host: could switching to geico really save you

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host: did the waltons take way too long to say goodnight? mom: g'night john boy. g'night mary ellen. mary ellen: g'night mama. g'night erin. elizabeth: g'night john boy. jim bob: g'night grandpa. elizabeth: g'night ben. jim bob:'night. elizabeth: g'night jim bob. jim bob: g'night everybody, grandpa: g'night everybody. jim bob: g'night daddy. vo: geico. 15 minutes could save you 15% or more. we're back with our special edition of "meet the press" from california, and joining us our chief foreign affairs correspondent andrea mitchell and chief white house correspondent chuck todd. thanks for coming out. you heard governor schwarzenegger on the front line of what a lot of states are going through, a 2010 that looks like 2009 which is or rhorrendo.

you ask about health care reform, he's not happy about what appears to be coming down the pike. >> he was not. that should have the white house frustrated. they counted on schwarzenegger being one of the few republicans they can get behind the stimulus, behind other things they tried to do. he was hitting them hard over this deal they cut with senator nelson. you could see a vain pop in his neck. very upset that nebraska is going to get exempted from medicaid mandate costs and the other have to pay for it. california, this budget problem is going to be what the bank bailout was in '09 for president obama, the state bailouts could be in 2010 for him. this could be the big thing that nobody's going to like, everybody's going to say is unpopular about it maybe the government will have no choice. >> he talked about health care akin to beating up on california at a time when it wants billions in repayment from the federal government. >> here you've got a republican

governor who is nonpartisan, he was defending the president on a lot of things, the terror war, but basically saying that the democratic senators and representatives from california should not have voted for this. now ben nelson, backing off, saying that they should do a fix where every state gets their full medicaid bill paid for. that's another $27 billion. they have a problem here and they were counting on governors like ed rendell from pennsylvania going out and trying to drum up support for health care. they are sending bill clinton to the house democratic caucus the end of this week, trying to get him to do what he did in the senate side, vote for this or you will lose next year as we lost in 1994 in the midterms. >> chuck, here the president faces unemployment at 10%, this week more jobs lost, it stays unchanged at over 10%. mark zanldy an economist who with moody's economy.com, the white house consulted with him. he says unemployment will go to 10.8% by october.

the president wants to fight the deficit but states like california and others saying we need more stimulus, more federal help even though governor schwarzenegger says it's not a bailout. >> they are working on a second stimulus, the white house is afraid to call it that. it's this about $250 billion, some transportation things, different things they are trying to boost things along. but they are going to have no choice. this state budget crisis i think is something, folks don't appreciate these most of these states, look, as governor schwarzenegger said he can't print money. they can't run deficits, they have these constitutional mandates to balance their budgets. and all of these big states are going to get hit. the thing is when you're hearing about school days getting shorter, when you hear about school years getting shorter, boy, that is just politically so unpopular. you can see how the pressure gets applied to washington, to congress, and it's not going to be popular but they are going to feel they have no choice. >> andrea, it's 2010, a lot of

people are looking up saying government isn't working. that's what barack obama ran on. >> so you not only have the change hasn't worked, in the perceptions of a lot of people with this high unemployment, and the real unemployment rate many say is 17.3%, people who have given up trying to get jobs. that's even worse. but that there's a whole anti-incumbent ferver out there. so the democratic party is facing the reality that in 2010 if it doesn't start to change, they are going to feel the anger, the anger that the tea party advocates epitomize. >> watching your interview with governor schwarzenegger reminded me like could that be president obama in six years. you saw this frustration in governor schwarzenegger. he came in on the recall effort. this idea that people were sick and tired of government not working in california. they said we're going to actually recall the governor and it was unprecedented at the time. we're going to bring in this

outsider who really thinks he can change everything, bring in a new face. and you saw, he whips out his list, half done. you see that was what president obama tapped into was candidate obama, this idea he's a new face, able to do these things and bring the parties together in a way that cannot be done. i think in his first year he probably has this list. you wonder does that go to your question, government, maybe these places are less governable. >> he said the problem is you say you're going thedo something and you do it and it's unpopular. look what president obama had to do in terms of bailouts, wall street t auto companies. he had to do things. there are debates whether he had to do all of those butty takes unpopular positions because of a crisis. that's what he faces whether government is ultimately making things better. >> then politically the white house will say if we had taken a poll we wouldn't have bailed out gm, over time they think that as long as he's got the personal credibility still with the public, they may be disappointed

in all of these things that he's doing but that somehow this personal credibility and that when the aircraft carrier finally turns, that they think maybe he'll get credit. >> let's talk about the political landscape, andrea. this week the announcement of some prominent retirements. chris dodd in connecticut, he faced a tough race. byron dorgan in north dakota, governors as well, democratic governors in the mountain west where democrats were making gains now saying they aren't going to run. what does it mean? >> the byron dorgan decision in north dakota was a stomach punch because they're not going to be able to hold that seat likely especially if the popular republican governor runs. chris dodd's decision was actually a blessing for the democrats. because they were going to have to write off that seat. he was running so far behind in his race. and now they could be competitive if the fairly popular veteran attorney general turns out to be as good on the stump as he has been as attorney general. but it taps into what you were

talking about, there is a feeling of there was so much promise and hope only a year ago, and now because of continuing economic woes, all of the bailouts, the problems on the terror front, government is not working the way people expect itted to. >> i talked to a white house adviser who said the problem for this president with independent voters is that feeling hey, i may believe in this guy but he can't solve these huge problems. the debt, government working overall, wall street, he can't prevent the little guy from getting hurt by these forces. >> and there's a snowball effect. you say what the retirements mean. individually the white house was trying to say the dodd thing was a blessing and it is, the dorgan thing, he was going to lose, and ritter, he was running a bad race. we're going to get a better candidate. and you can explain all of that away. but it does lead to this idea that you know, these guys would be running if they thought they were going to win. and the fact is the landscape stinks and it is because you

have a combination of things. you have democratic base not fired up the way they were in 2006 and 2008. independents which you mentioned about that the white house realizes, they are disappointed. now t question is do they show up and suddenly vote with the republicans, which then would create a republican wave and tsunami and they probably would take control or do they not show up at all out of frustration at the system. >> as we talk about republicans a little bit because republicans can't necessarily take all of this to the bank. you look at the map that we'll show of pickup opportunities, eight legitimate pickup opportunities run through that list. then look at the democrats. >> in the senate, you do have these races, they feel good about some of them that are environmentally driven, arkansas, blanche lincoln, a state that voted in huge numbers for mccain. you have all of the appointed senate seats that they feel like three of the four they feel they have a good shot at. joe biden's seat in delaware. especially if his son doesn't

run, he hasn't announced t. byron dorgan retirement has people worried that beau biden will say if he's having second thoughts maybe i will. colorado, michael bennett, not gone well. illinois they don't have an "a" list democrat running in that primary. it's going to be a messy primary. so you put all of those together and you see why republicans think they can pick four or five seats up. the problem republicans have, though, they have their own retirements. they had kit bon, they have judd gregg so they have their own vulnerabilities. so having huge gains seems out of the realm. >> you saw what happened in new york state in that congressional district. which republican party do they belong to? which republican shows up. arnold schwarzenegger more than anyone shows you the different kind of republican who doesn't want the partisanship, who isn't willing to just attack barack obama on any given question, who would point out that on intelligence and the war on terror that he's doing the best that he can.

>> that kind of republican cannot win a republican primary. >> but the republicans are in disarray about what they want their party to be and you had the chairman of the party saying this week that he didn't think they could retake the control of congress. >> trying to embrace the tea party movement, they want to embrace it on one hand but the establishment in washington nervous about them at the same time because you know, you do wonder are they eating their own. we look at this florida senate primary is going to be sort of front and center of the tea party movement versus the establishment. the popular governor charlie crist, mark orubio. >> the politics will dominate but also what the president has gone through with the aftermath from this christmas day terror plot. david broder wrote on friday this about the president.

this is a priority now. >> it's a priority and clearly was barack obama taking charge of this national security team, not just being a passive recipient of briefings but really saying what are you doing, what are you doing, who is talking to whom. this is your last warning. you guys have got to change things, you have to start communicating better. it wasn't obviously that they didn't have the information. the analysis was not tough enough. they have to be much more rapid. with this -- with all of the new technologies they have got the tools to do it. the people were not up to the job. >> now a new warning out this weekend about a reminder of the threats that come not just from somalia and yemen but also from pakistan and afghanistan. >> and this brings it home because al qaeda we've been saying has become franchised and have gone from al qaeda central to these other country, yemen and somalia.

you've got the martyr suicide video of the man who did such incredible grievous damage to our cia forces in afghanistan in the bombing in khosth. this is in retaliation. they are going international. they are going after this target in afghanistan in a way they never have before. it shows you how they have stepped it up. and we have to get ahead of the game and right now we are on the defensive. now we have to look at everything in our arsonal. we have to look at every asset and wonder who out there is also a turncoat. >> how did the president come out of this week? >> i think he's at this point where you do nothing almost but react to events on the ground. he doesn't have the ability any more i think to set an agenda in the way that first year presidents do. we are truly in this second year and the rest of his presidency reacted quickly that ft. hood

review is going to be fascinating. that's when we may see heads roll in the intelligence area. >> for missing the signals. >> the missed signals on hasan are similar to the detroit bomber. >> chuck, before you go, harry reid already facing a really tough re-election in 2010. now as we referred to early on in the program, has some apologizing to do and is doing it. >> he does. if he weren't senate majority leader we would be talking about what kind of pressure is going on, what whisper campaign is going on to get harry reid to do the right thing and retire. the problem is he's the majority leader. that would send such a crazy signal to a party that is on the brink of looking like it's in disarray politically so they couldn't afford to have. harry reid has been a gaffe machine in the past but you do wonder, if he somehow wins re-election, he would be doing something that an incumbent senator i don't think has done in 50 years which is recover

from a double digit deficit. >> does it hurt his relationship with the president? >> not getting health care done would hurt his relationship. harry reid has said dumb things to the president in the past. the president is pretty forgiving. >> thanks to both of you for coming out here. i want to mention a special program note. watch the debut of the daily rundown hosted by our white house team, chuck todd and also savannah guthrie, starting monday at 9:00 a.m. on msnbc and their guest, rahm emanuel. we'll be right back.

that's all for today from california, we'll be back next week from washington. if it's sunday, it's "meet the press."